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Trial Ends for Samsung Ex-Chairman

Prosecutors Request
Seven Years in Jail
For Past Chairman

By

Evan Ramstad

Updated July 11, 2008 12:01 a.m. ET

SEOUL -- Prosecutors on Thursday asked for a seven-year prison term for
Lee Kun-hee,
the former chairman of the Samsung conglomerate, as they wrapped up a trial that was far shorter than the high-profile, three-month state investigation into wrongdoing at South Korea's biggest business.

A Seoul Central District Court judge is due to rule on the charges of tax fraud and breach of trust against Mr. Lee next Wednesday. If Mr. Lee is convicted, the judge might also pronounce a sentence at the same time. Under the charges brought against him, the 66-year-old Mr. Lee could receive life in prison, but Korean judges have a long record of leniency with major business executives.

Lee Kun-hee, former chairman of the Samsung Group, right, arrived at the latest hearing in his trial for tax evasion and other charges. Associated Press

After the charges were brought against him in mid-April, Mr. Lee retired from Samsung, the business empire that his father started 70 years ago and that he had led since 1987.

Mr. Lee has pleaded not guilty to the charges. Still, in several public and court appearances since retiring, Mr. Lee apologized to South Koreans and Samsung employees and accepted blame for wrongdoing at the conglomerate. He did so again during Thursday's hearing, telling the court he was "ashamed" about the charge brought against him in connection with tax. "It's natural for me to take responsibility, whether legally or morally," Mr. Lee said.

At Thursday's session, his attorneys asked for leniency. Earlier in the week, they presented the court with written testimonials on Mr. Lee's behalf from several prominent figures that, according to Korean news media, included former U.S. President
George H.W. Bush
and International Olympic Committee honorary president
Juan Antonio Samaranch.

Mr. Lee's trouble began last November when a former Samsung attorney alleged that various affiliated companies created secret bank accounts under employees' names to stash funds used to pay bribes to influential South Koreans, including politicians, judges and prosecutors.

The National Assembly appointed a special prosecutor, whose investigation grabbed local headlines nearly every day from the start of the year until indictments were announced against Mr. Lee and nine other Samsung executives.

The special prosecutor found no evidence of bribery. Instead, he said he discovered that the bank accounts were used to hide 4.5 trillion won, or about $4.5 billion, of Mr. Lee's personal assets, far more than he was known to be worth, and to evade taxes.

In April, Samsung officials explained the accounts as a step to preserve the Lee family's control of the conglomerate and fend off potential bidders for its approximately 60 companies, the largest and best-known of which is Samsung Electronics Co.

In contrast to the long investigation early this year, the trial for Mr. Lee and seven of the executives has been short; it was conducted in seven half-day sessions since June 12. That difference reflects a tradition in South Korea's legal system, where prosecutors are responsible for investigation as well as prosecution and rarely file charges unless they feel certain of guilt.

In asking for a seven-year sentence, the prosecutors topped by one year the sentence they sought for another prominent businessman, Hyundai Motor Co. Chairman
Chung Mong-koo,
when he was accused of accounting fraud two years ago. In that case, the trial judge in February last year found Mr. Chung guilty and sentenced him to three years in prison. Judges in an appeals court in September reduced the sentence to community service, citing the executive's importance to South Korea's economic well being.

With Mr. Lee's resignation from Samsung, public sentiment has turned more sympathetic toward him. In addition to leaving the conglomerate, Mr. Lee in April said he would repay all the back taxes and penalties. Samsung also pledged to stay out of the retail-banking industry, which is likely to be opened to large industrial conglomerates in the next year or so.